Getting a tax refund can be exciting. It means you will get some extra money you may not have been expecting that you can spend or save!
How much of a tax refund you will get depends on how much taxes you overpaid. But, you may wonder, is there is a limit on how much of a tax refund you can receive?
Or, put another way, what is the maximum tax refund you can get? Could it be hundreds of thousands of dollars? Possibly even a million? Or more?
Today, we will share with you the maximum tax refund limits that you can receive.
What Is The Maximum Tax Refund You Can Get?
There is no maximum limit on how much tax refund you will receive. So, your tax refund amount will depend completely on how much taxes you overpaid.
You can receive any amount of money from tax refunds as long as it is the amount you overpaid to the government.
However, when it comes to direct deposit for your tax refunds, there is a limit on the number of refunds deposited into a single financial account.
The limit is up to 3 refunds. The 4th and beyond refund will be automatically converted into a paper check mailed to the taxpayer.
Along with the check, the taxpayer will receive a notice stating that the account has exceeded the direct deposit limits and that they will receive a paper check instead in approximately four weeks.
Did you know that there are also ways you can boost your tax refunds?
How To Boost Tax Refunds
The first method is to consider your filing status. For example, many married couples file jointly. But in some cases, filing separately from your spouse may be a better idea.
For example, if one spouse has a lot of medical expenditures, filing separately may reduce their taxable income and increase their deductions. Another option is the Child Tax Credit.
For spouses filing separately, in 2020, the tax credit is $2,000 per child under the age of 17 if the filer has less than $200,000 adjusted gross income. However, beware that filing separately from your spouse poses the risk of missing out on some tax credits.
Claiming tax credits can also help in getting a bigger tax refund. For example, if you owe $4,000 in taxes and have a claimable $1,000 tax credit, then your tax liabilities drop to $3,000.
And some tax credits are refundable. Refundable tax credits allow you to claim these credits even if you do not have tax liabilities. Popular examples of tax credits are Earned Income Tax Credits, Child and Dependent Care Credit, and the aforementioned Child Tax Credits.
Tax deductions can also help you claim a bigger tax refund. Much like tax credits, tax deductions also lower the amount of your tax liability.
You can try calculating how much state and local taxes you can deduct using the IRS calculator. It would help if you also kept track of out-of-pocket donations and charitable contributions, as even small donations are eligible for tax deductions.